How a Smarter Grid Can Prevent Blackouts—and Cut Your Energy Bills

Much of the electricity consumption in the U.S. is concentrated to a handful of hours during the year, primarily during hot summer days. This so-called peak demand puts considerable stress on the grid, increasing the risk of blackouts and brownouts. It also significantly raises the year-round price of power for consumers. But we don't need more costly power plants to fix the problem. Better information and decision-making during times of peak demand could significantly reduce generation costs and the risk of power outages.

Stressed from the summer heat? So is the electricity grid. Each region of the country is different, but it is safe to say that the grid on a whole is most stressed when it's either very cold or very hot outside, since heating and cooling are so energy intensive. Electricity demand hits its highest point during the summer, primarily due to the widespread use of electric air conditioners. In fact, the grid has to work harder during the afternoons and evenings of the hottest summer days—known as periods of peak demand—than it does at any other time of the year.

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Since energy cannot be stored efficiently on a large scale, utilities must meet rises in demand with more generation. Less than half of the generation capacity in the U.S. comes from power plants designed to run all the time to meet demand. "The rest is in reserve for the hotter or higher demand days," says Steve Hauser, vice president of grid integration at the National Renewable Energy Laboratory. Reserve plants are much more expensive to operate, resulting in large disparities in generation costs throughout the day and year. According to a 2004 report by the U.S. Government Accountability Office, it can cost up to 10 times more to generate electricity during a summer afternoon compared to at night, and the top 100 highest priced hours account for 10 to 20 percent of electricity costs for the 8766 hours in each year.

To compound the problem of high generation costs, peak electricity demand is on the rise. A 2009 report by the North American Electric Reliability Corporation (NERC) predicts that, on average, peak demand will increase by almost 15 percent by 2018. That rise is not just due to population growth, says Brian Seal, an electrical engineer who specializes in load management at the Electric Power Research Institute (EPRI). The proliferation of consumer electronics and other plug-in devices, like personal computers and home entertainment systems, play a role as well. While air conditioners and other appliances are getting more efficient, "it is more than compensated for by our thirst for new types of devices," Seal says. "So the net effect is that the average consumption per person is going up."

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One way to meet increasing demand is to build up infrastructure. But constructing power plants and laying lines is expensive and time-consuming (a 1000-MW nuclear plant, for example, costs upwards of $2 billion and can take well over 15 years to build). If utilities and consumers work together to better manage demand during peak hours, however, they can lower energy significantly. Here are four ways to decrease peak demand with efficiency alone:

Better Information for Consumers

In general, consumers are left in the dark regarding the disparity between generation prices inside and outside the peak demand window. We usually pay a fixed seasonal rate no matter how much electricity use. But utility company-conducted studies consistently show that when consumers are aware of real-time price fluctuations, and are asked to pay dynamic rates based on the time of day they are using electricity, they scale back their consumption during peak hours. Installing "smart meters" and communications technology necessary to make prices more transparent is a major goal of the federal government, which invested nearly $4 billion smart grid technologies through the 2009 American Recovery and Reinvestment Act. Utility companies across the country are developing strategies for smart meter implementation, and rolling out pilot programs to test pricing models. California is leading the charge, with plans to have over 10 million smart meters operational within the next three years. But implementing smart metering throughout the country will call for a large up-front expenditure. Using the California cost as a proxy, it's been estimated that it could cost up to $40 billion.

Better Information for Utilities

Besides smart meters, one of the first smart grid components to be deployed is called a phasor management unit (PMU), or synchrophasor. PMUs measure parameters like voltage and current at multiple locations across the grid and use GPS technology to give outputs with high-resolution time stamps. Since the measurements are synchronized, data from multiple PMUs can be combined, providing grid operators with a comprehensive picture of real-time conditions across an entire region. Since PMUs can collect so much data so quickly (about 30 times a second), in the case of unexpected changes in demand, they could help utilities respond more quickly by, say, shedding or shifting electricity load from an overburdened plant. The technology generally used to monitor the grid today refreshes only once every four seconds. "Certain circumstances are happening faster than a four-second scanning rate can measure," says Jeff Dagle, chief electrical engineer for energy technology development at Pacific Northwest National Laboratory.

PMUs could also provide crucial information to grid workers trying to restore power to specific regions after an outage, and help investigators more clearly understand what went wrong after blackout or brownout, Dagle says. Over the next three years, there will be a dramatic increase in the number of PMUs deployed across the country, spurred by the Recovery Act.

Timing Is Everything

Consumers can reduce the peak by strategically timing certain processes. Water heating, for example, consumes a significant amount of energy, EPRI's Seal says, but hot water can be stored relatively easily. Heating it outside the peak would take a bite out of demand, easing the stress on the grid, even if under current pricing models it wouldn't shrink the monthly electricity bill. As smart grid initiatives advance, and pricing models change, Seal says, "one might find that heating your water at any other time than the peak is very, very cheap." A similar effect could be realized in well-insulated homes. People could precool or preheat their homes before the peak, "and then back off and coast during those hours." Seal says.

Additionally, some utilities have launched initiatives in which customers can opt to allow the utility to turn down their programmable home thermostats during peak hours. Programs like this should become more prevalent as long as utilities are willing to invest in the relevant technologies, and consumers are willing to buy into them.

Storage Is the Killer App

The ability to store energy on a large scale would be a game-changer, Seal says, since it would mean that more demand wouldn't necessarily have to be met with more generation.

Consider the water industry. "They don't really care when you use you water," Seal says. "If there were anything like that in the electricity industry it would really change a lot about how efficiently we can use the system, about how reliable the system is."

Although they make only a small impact on the whole, a few storage methods do already exist. Some utilities store energy underground in the form of compressed air. Another way, known as pumped hydro, involves using excess electrical energy to pump water uphill. When that energy is needed, the water is allowed to run back down hill and turn a turbine. But these methods are limited because they require specific geographical characteristics. Electrochemical devices, like batteries and flywheels could also be used to store energy for the grid—especially if they can be scaled up significantly. The federal energy department has made energy storage one of its top priorities for research and development.